Cloud computing requires us to rethink our IT models, but the benefits in cost, scalability, transparency are unparalleled

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For those of us who have made our careers in IT and technology, the cost savings and performance benefits of cloud computing are obvious. In some ways, it’s a no-brainer to make the transition. Yet, at the same time, the jump to the cloud can sometimes feel less like a standard technology migration and more like an enormous leap of faith.

That’s because in IT our natural desire is to own and control. It has been our modus operandi for decades. We have always been able to point to what we own with pride.

Embracing the cloud requires us to give up that feeling of access and control. This is a huge cultural and emotional shift, especially if you grew up in hardware as I did. With the cloud, practically all of the things we’ve known and believed to be true of technology are in the past. Now, software sits squarely between you and the infrastructure, and it is a bit unnerving at times.

The reality, though, is that the infrastructure has been commoditized. The cloud promises massive computing power, better security, improved efficiency and transparency, all at tremendous costs savings.

I’m often approached by CIOs who ask me about my experience in transitioning 100 percent to the cloud. Most of us recognize and believe that the cloud is the future of computing, yet overseeing such a huge migration creates enormous personal and professional pressure. It’s hard not to feel as though our careers are on the line. It doesn’t have to be that way.

First, it’s important to dispel the belief that to be successful we need to see and control every aspect of the infrastructure. Cloud environments have proven to be scalable and secure. And although we can’t really see it, we can continuously validate, test and exercise the environment on demand.

It’s easy to forget we’ve experienced, and survived, these seismic shifts before. We used to program software with machine language. When C+, Fortran and Java emerged, it required programmers to concede a level of trust—that we could essentially use language to program software versus writing to the metal.

Second, the business case for cloud is strong. Traditionally, we’ve followed a capital investment model. We invest in software and hardware. We pay license and maintenance fees annually. We have facilities costs. And then we rinse and repeat every three or four years when it’s time to upgrade to new versions for improved scalability, security and functionality.

But the capital model is flawed. Despite carefully defined budgets and project goals, inevitably, more requirements get added to the list. Trade-offs are made. Increases in scale or speed are very expensive. Timelines get extended. The business sees IT as a shared service, so no one is willing to pay more. It’s difficult to track costs to projects and resources across multiple departments. As fixed budgets and resources are eaten up, newer, cutting-edge projects get put to the side.

In a cloud world, the ultimate goal is to not have any infrastructure. The capital model is replaced with a variable model based on monthly usage fees for everything. The cloud is an operating expense, not a capital expense—it’s very different for the business.

This model, and the tools available, creates a level of transparency we’ve never had before. We can see which product, service, or individual is consuming resources. We can better see how a new product will increase operating expense incrementally rather than buying for the worst-case scenario. The cloud allows for a much more detailed and precise way of tracking costs and ROI, beyond allocation models. In the cloud, we have visibility into the cost relations between any application, network, storage, department or individual. It gives IT the information to drive good decisions.

And the control is superior to anything we’ve had before. In the traditional model, we pay for hardware, licenses and maintenance, whether we use them or not. In cloud, we have multiple levers that we can switch on or off that allow us to be flexible to adapting business changes. We can pull back on resiliency, scalability, and non-production environment costs. And of course, on the flip side, it’s a push of a button to scale up capacity or speed as the need arises.

Without a doubt, one of the greatest challenges in moving to the cloud is convincing the CFO and the CEO that they need to shift their existing business model. There is always resistance to raising operating expense, but ultimately, my experience has been that the operating expense will go down with optimizations and the capital expense will disappear. EBITDA could be affected during a transition, but ultimately, you’re not paying for unused capacity and the operating expense will drop at an impressive rate. It’s important to make the case that with a capital model you always overspend for IT.

The cloud allows you to optimize costs. At GHX, I have seen a 45 percent reduction of costs with a 400 percent increase in volume. It’s actually stunning what can be done.

Moving to the cloud requires us to re-think how we manage our IT resources. In my next post, I will review some of the key consideration in making the transition, including:

Control (of platform, infrastructure): Is it wise, or beneficial, to relinquish control to a third party?

Cultural alignment: What happens with the folks that built the traditional systems? How do we transition the employees to this model?

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